Economies of scale in the automobile industry

Abstract

Recent discussion of productivity in the automobile industry has been focused on the rise of flexible manufacturing, even suggesting that this phenomenon now takes prominence in defining the costs of production. However, flexible manufacturing does not redefine the production technology but is instead a method for more fully utilizing it. Truett and Truett (2001) assert that the presence of economies of scale in the automobile industry continues to be a significant factor for companies, recommending that the Spanish industry, for example, would find cost advantages in expanding. The expansion would not necessarily be uniform across all the production processes, since each process can have a distinct MEPS.